4 ms·
I’m as happy as anyone to grant that economics is not a hard science. But saying our only explanation for this predictor is “the market thinks” seems pretty of
by mercutio2 7y ago
I’m as happy as anyone to grant that economics is not a hard science.
But saying our only explanation for this predictor is “the market thinks” seems pretty off base.
- Yields are based on demand
- Yield inversion indicates heightened demand for long term safe stores of value, reduced demand for short term stores of value
- This pattern maps well to our understanding of investor psychology
- Recessions generally happen when investors are gloomy about short to medium term prospects, leading to a reduction in investment, leading to a reduction in aggregate demand
- krageon 7y agoYour reasoning sounds really seductive, which is on point for economics. The next step is actually giving solid reasoning (preferably backed by hard evidence - this means numbers) for why this is the truth and not some other equally seductive line of reasoning. Without this, you're just reading tea leaves and explaining them well.